You’re missing out on Compound and DeFi, here’s why in 5 minutes

Welcome to another quick 5 minute guide to understand the compound protocol. If you’re into crypto, chances are you’ve heard about it. That’s great! if not here’s your opportunity to learn what compound is all about.

Compound is simply a tool for people to get money (borrowing) and to give it to others (lending). It’s that simple. Now there are some key aspects that make this project one of the most interesting ones in crypto right now…

It’s the biggest DeFi project. DeFi means Decentralized Finance and it’s a group of new projects focused on bringing traditional finance tools like compounding loans into crypto, in a decentralized way.

They have what’s called a Liquidity Pool which is simply a Smart Contract where all the money is stored. A single place to borrow money from. Traditionally in most decentralized banking apps, you have to make a loan to a borrower directly, peer-to-peer.

With Compound, they have a single place with all the money and people access it as they need. So if you want to borrow say, 10 ETH you can do that from the pool. Of course, you always have to have a collateral.

A collateral is some token like ETH that you provide to the liquidity pool for others to use. For instance, let’s say I want to setup as…